Over 40% of the entire corporate bond market, 3.15 Trillion in BBB-rated bonds is one step above junk!

The percentage of investment grade bonds rated higher than BBB has fallen from 59% in 1996 to 42.8% in August of 2018.

Bond Market Breakdown (August 2018)

AAA $0.11 Trillion

AA $0.59 Trillion

A $2.60 Trillion

BBB $3.15 Trillion

BB $0.57 Trillion

B $0.52 Trillion

C $0.16 Trillion

Rise of the Zombie

In the US, 15% of the companies in the S&P 1500 are Zombie corporations. The Zombie attribute applies to firms that are unable to cover debt servicing costs from current profits over an extended period.

Netflix has gone from having very little debt in 2010 to having more than $10 billion now. Verizon now has $113 billion of debt, more than double the amount it had six years ago. By one measure, the ratio of corporate debt to G.D.P., the total level of borrowing is at all-time highs.

And with the American economy already expected to slow in 2019, the climbing costs of corporate borrowing could determine whether any slowdown turns into something much worse.

My Mish Talk - Global Economic Trend Analysis blog typically has commentary every day of the week. I am also a contributor to TalkMarkets and a "professor" on Minyanville, a community site focused on economic and financial education.

When not writing about stocks or the economy I spend a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com.